Black & Decker 2010 Annual Report Download - page 29

Despite efforts to prevent such situations, insurance policies and loss control and risk management practices,
that partially mitigate these risks, the Company’s systems may be affected by damage or interruption from,
among other causes, power outages, computer viruses, or security breaches. Computer hardware and storage
equipment that is integral to efficient operations, such as e-mail, telephone and other functionality, is
concentrated in certain physical locations in the various continents in which the Company operates.
In addition, the Company is in the process of implementing system conversions to SAP to provide a common
platform across most of its businesses. There can be no assurances that expected expense synergies will be
achieved or that there will not be delays to the expected timing. It is possible the costs to complete the system
conversions may exceed current expectations, and that significant costs may be incurred that will require
immediate expense recognition as opposed to capitalization. The risk of disruption to key operations is
increased when complex system changes such as the SAP conversions are undertaken. If systems fail to
function effectively, or become damaged, operational delays may ensue and the Company may be forced to
make significant expenditures to remedy such issues. Any significant disruption in the Company’s computer
operations could have a material adverse impact on its business and results of operations.
The Company’s operations are significantly dependent on infrastructure, notably certain distribution centers
and security alarm monitoring facilities, which are concentrated in various geographic locations. If any of
these were to experience a catastrophic loss, such as a fire, earthquake, hurricane, or flood, it could disrupt
operations, delay production, shipments and revenue and result in large expenses to repair or replace the
facility. The Company maintains business interruption insurance, but it may not fully protect the Company
against all adverse effects that could result from significant disruptions.
Unforeseen events, including war, terrorism and other international conflicts and public health issues, whether
occurring in the United States or abroad, could disrupt our operations, disrupt the operations of our suppliers
or customers, or result in political or economic instability. These events could reduce demand for our products
and make it difficult or impossible for us to manufacture our products, deliver products to customers, or to
receive materials from suppliers.
If the investments in employee benefit plans do not perform as expected, the Company may have to
contribute additional amounts to these plans, which would otherwise be available to cover operating
expenses or other business purposes.
The Company sponsors pension and other post-retirement defined benefit plans. The Company’s defined
benefit plan assets are currently invested in equity securities, bonds and other fixed income securities, and
money market instruments. The Company’s funding policy is generally to contribute amounts determined
annually on an actuarial basis to provide for current and future benefits in accordance with applicable law
which require, among other things, that the Company make cash contributions to under-funded pension plans.
During 2010, the Company made cash contributions to its defined benefit plans of $277 million and it expects
to contribute approximately $140 million to its defined benefit plans in 2011.
There can be no assurance that the value of the defined benefit plan assets, or the investment returns on those
plan assets, will be sufficient in the future. It is therefore possible that the Company may be required to make
higher cash contributions to the plans in future years which would reduce the cash available for other business
purposes, and that the Company will have to recognize a significant pension liability adjustment which would
decrease the net assets of the Company and result in higher expense in future years. The fair value of these
assets at January 1, 2011 was $1.751 billion.
The Company is exposed to credit risk on its accounts receivable.
The Company’s outstanding trade receivables are not generally covered by collateral or credit insurance. While
the Company has procedures to monitor and limit exposure to credit risk on its trade and non-trade receivables,
there can be no assurance such procedures will effectively limit its credit risk and avoid losses, which could
have an adverse affect on the Company’s financial condition and operating results.
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